The Banglore Bench of Customs, Excise and Service Tax Appellate Tribunal quashed the service tax demands on grounds that any sort of remuneration received by a partner of a partnership firm does not amount to service.
Factual Background
The partner/assesses are the partners of a partnership firm namely M/s. Ernst &Young, LLP. The appellants have filed their income tax returns showing components such as “sale of services” against which partners have shown a certain amount received from the partnership firm as their income.
The income tax returns were supplied to the concerned authorities, who after examining the ITR questioned the appellants as to why the account of sale of service be taxed under the Finance Act, 1994. The appellants replied to the queries; however the authorities below confirmed the demands on account of service tax payable by the appellants.
Case of the Appellants
The counsel for the appellants submitted that appellants are partners of partnership firm and they received certain amount that is shown as profit in their income tax returns. The amount is nothing but a remuneration received by a partner of a partnership firm and they have not provided any service to any third person except to their partnership for which they are owners. In such a situation, no service tax is payable to the appellant.
Observation of the Tribunal
The tribunal observed that as there is no recipient of service, no service has been provided by the appellant. In the income tax returns, the figures presented by the appellants as sale of service is just portion of profit earned by the partnership firm. Hence, the appellants are not liable to pay service tax.
Case Details
Before: Banglore CESTAT
Case Title: Gautam Bhattacharya v. Commissioner of Central Tax and Yatin Vijaya Patil
v. Commissioner of Central Tax
Coram: Ashok Jindal (Judicial Member) and C.J. Mathew (Technical Member)
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